UK’s FTSE 100 hit three-month lows on Friday after Britain’s new finance minister Kwasi Kwarteng unveiled historic tax cuts and spending plans to boost the economy but knocked market sentiment as investors grew concerned about a huge increase in borrowing.

Kwarteng announced an economic agenda designed to thrust Britain out of a cycle of stagnation and into a new era of higher economic growth - but with a hefty bill attached.

The internationally focussed FTSE 100 closed down 2.0% at it lowest level since June 17, while the domestically focussed FTSE 250 index also dropped 2.0% to hit near two-year lows.

The plan included scrapping the country’s top rate of income tax and an increase in the corporation tax rate. Kwarteng said Britain will spend about 60 billion pounds ($67 billion) on subsidising gas and electricity bills for the next six months for households and businesses.

“Inflationary headwinds continue and with this tax cut giveaway potentially only adding to inflationary concerns, it makes the Bank of England’s job of cooling rising costs even harder,” said Charles Hepworth, investment director at GAM Investments.

“The good news is that the Bank at least retains its independence, for now.”

UK’s homebuilder stocks fell 1.3% after getting a brief boost from the government’s plans to cut stamp duty to help families afford to buy homes. It is among UK’s worst performing sectors this year as rising rates sparked worries about affordability.

A survey showed the downturn in British businesses steepened this month as they battled soaring costs and faltering demand, hammering home the rising risk of recession.

“We’re very cautious about cyclical equities. We need to see PMI get to trough levels rather than the downward trajectory that we’re on at the moment,” said Roger Jones, head of equities at London & Capital.

Data earlier showed British consumer confidence slid this month to its lowest level since records began in the mid-1970s.

Oil and mining majors were the biggest drags on the FTSE 100 as commodity prices weakened against a strong dollar.

Among single stocks, Burberry fell 4.6% after the luxury group said Chief Financial Officer Julie Brown was planning to step down in April.

Smiths Group rose 1.3% after the industrial technology group provided an upbeat full-year 2023 forecast.

Made.com plunged 20.0% after the online furniture retailer said it was cutting jobs and mulling options including a sale as it struggles with a steep fall in consumer spending and supply chain snags.